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Sudhir Singh, CEO, Coforge, says “when we closed last quarter, we were on the cusp of closing an order executable which is a next 12 months signed order book of about a billion dollars. We were at $974 million. If all goes well, and we hope it will, we should close the year with a billion dollar next 12 month signed order book. And that is going to be a big milestone for us. So large deals, the pipeline, the width of the pipeline, the conversion rates continue to sustain as they have over the last four to five quarters.”

Despite the fact that we have seen a bit of a tough environment, Coforge has maintained industry-leading growth. What is it that you are doing differently and do you think this outperformance can sustain?
Sudhir Singh: At the end of the first three quarters, we are growing almost 14.5% year-to-date in CC (constant currency) terms. The important thing about our performance is that this is organic 14.5% year-to-date growth at the end of the first three quarters. I suspect what we are doing differently is executing at a higher scale. When I say executing at a higher scale, what I mean is I believe that we are able to retain the existing book of business that we have and then layer it with the wins that we are talking about. All of us as players in the sector, in the industry record wins.

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The important thing is not just recording new wins. It is A, being able to scale them up in the quarters to come. B, equally importantly, the book of business that one walks into a quarter or a year needs to be well-defended and organically grown. So execution in many ways, not just this year, but over the last six years has been the differentiation.

You talked about deal execution and that has always been the gap for the industry. While deal wins were strong but execution clearly was the problem. Any change in client scenario that you foresee now?
Sudhir Singh: As far as client budgets are concerned, the budgets are locked and loaded. We are already into March of this year, and all of us have a sense in terms of what client budgets are given where the interest rates are right now, given the fact that there is still ambient uncertainty because of the war in Europe.

At this point in time, the budgets that we are looking at for the current calendar year, CY24 are not materially higher than the budgets that we actually saw in plain calendar year 23. So to that extent, this year, from a demand perspective, is likely to be a repeat of last year. And when you have demand headwinds which continue and are likely to continue in the current quarters, what is most likely to happen is that performance that you will see across players in our sector also will also tend to continue to stay very differentiated as it has been in fiscal year 24.

Growth will continue to be differentiated amongst the players, but I just wanted to shift focus and talk to you about your own growth guidance as well. You started the year with a 13 to 16% guidance. You are tracking 15% right now, but what about the growth rate for FY25? Directionally, do you see an improvement in FY25 growth rate versus FY24?
Sudhir Singh: It is a little premature at this stage to call that out. The year has started with budgets more or less on par with what they were last year. Directionally, when budgets, the overall, the size of the sandbox remains the same you would expect growth patterns to remain more or less the same, but still a little premature. We are going to close the current year and on the 2nd of May offer a clear, possibly a forecast for next year.All right, given that you have been clocking in $300 million plus deals for the last eight quarters, what is the deal momentum looking like? Is there some sort of a slowdown or do you think that this momentum can sustain?
Sudhir Singh: No, deal wins continue to be the case. When we closed last quarter, we were on the cusp of closing an order executable which is a next 12 months signed order book of about a billion dollars. We were at $974 million. If all goes well, and we hope it will, we should close the year with a billion dollar next 12 month signed order book. And that is going to be a big milestone for us. So large deals, the pipeline, the width of the pipeline, the conversion rates continue to sustain as they have over the last four to five quarters.Right, and are these deals coming in at decent margins in terms of competitive intensity?
Sudhir Singh: Yes, well, what we call in the industry EN deals, which is existing new deals, deals that come from existing clients, deals that involve renewals, deals that involve expanding your market share are coming at more or less the standard, the existing margins for the firm. And in deals, which are net new deals for us, is the space where one tends to see significant price competition. And some of those are seeing active discounting taking place.

Renewals are happening at similar rates, but in new deals, there is a bit of active discounting. You had laid out a roadmap of 50 bps margin expansion. Is that on track at least?
Sudhir Singh: We are, we absolutely are. Next year, we expect to drive our margins higher. We have made significant investments through this year. As the economy was slowing down, as the macros were getting more difficult to negotiate, through the year, if you look at FY24, we have continued to add to our SG&A, and more specifically, within SG&A to S&M, sales and marketing costs. We have already hit the 15% threshold. We will now sustain SG&A at 15%, and the rest of it should start flowing down to the margins.

Finally, on AI, are the projects converting from the pilot stage to the revenue stage? What is the update?
Sudhir Singh: The way we are looking at AI, and the way we are looking at AI capabilities, AI revenue, is that it is a diagonal that is now running across all the horizontal tech capabilities. There is absolutely no conversation. There is absolutely no proposal. There is absolutely no defence that is happening right now, where the solution that we are offering is not infused with or by AI, or with a platform that is AI powered.

AI to that extent has become absolutely central to what we are doing. In FY25, we have closed our internal budgets; 40% of our incremental budgets for next year are going to see investments directly into the AI space and this has a multitude of things. Now to begin with this includes hardware that we are procuring, eight NVIDIA units to set up our own AI lab, where we will be doing the smart model tuning on an on-going basis.

This includes the investments that we are making, very concrete investments in up-skilling every employee. When it comes to AI, in the relevant AI technologies, cuts across all the service lines. It includes very hard work being done on the ground to reimagine every service offering that we have, and to make it AI first.

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